經(jīng)濟(jì)學(xué)（微觀）（英文版原書第7版）課件 第1-9章　經(jīng)濟(jì)學(xué)：基礎(chǔ)與模型-比較優(yōu)勢(shì)和國際貿(mào)易增益

EconomicsSeventhEditionChapter1Economics:FoundationsandModelsCopyright?2019,2017,2015PearsonEducation,Inc.AllRightsReserved.ChapterOutline1.1

ThreeKeyEconomicIdeas1.2

TheEconomicProblemThatEverySocietyMustSolve1.3

EconomicModels1.4

MicroeconomicsandMacroeconomics1.5EconomicSkillsandEconomicsasaCareer1.6

APreviewofImportantEconomicTermsAppendix

UsingGraphsandFormulasWhatisthisclassabout?Peoplemakechoicesastheytrytoattaintheirgoals.Choicesarenecessarybecauseweliveinaworldofscarcity.Scarcity:Asituationinwhichunlimitedwantsexceedthelimitedresourcesavailabletofulfillthosewants.Economicsisthestudyofthechoicespeoplemaketoattaintheirgoals,giventheirscarceresources.Economistsstudythesechoicesusingeconomicmodels,simplifiedversionsofrealityusedtoanalyzereal-worldeconomicsituations.Sometypical“economics”questionsWewilllearnhowtoanswerquestionslikethese:Howarethepricesofgoodsandservicesdetermined?Whyhavehealthcarecostsrisensorapidly?Whydofirmsengageininternationaltrade,andhowdogovernmentpoliciesaffectinternationaltrade?Whydoesgovernmentcontrolthepricesofsomegoodsandservices,andwhataretheeffectsofthosecontrols?1.1ThreeKeyEconomicIdeasExplainthesethreekeyeconomicideas:Peoplearerational,peoplerespondtoeconomicincentives,andoptimaldecisionsaremadeatthemargin.Economicagentsinteractwithoneanotherinmarkets.Market:Agroupofbuyersandsellersofagoodorserviceandtheinstitutionorarrangementbywhichtheycometogethertotrade.Inanalyzingmarkets,wegenerallyassume:PeoplearerationalPeoplerespondtoeconomicincentivesOptimaldecisionsaremadeatthemargin1.PeopleAreRationalEconomistsgenerallyassumethatpeoplearerational,usingallavailableinformationtoachievetheirgoals.Rationalconsumersandfirmsweighthebenefitsandcostsofeachactionandtrytomakethebestdecisionpossible.Example:Appledoesn’trandomlychoosethepriceofitsiPhones;itchoosestheprice(s)thatitthinkswillbemostprofitable.2.PeopleRespondtoEconomicIncentivesAsincentiveschange,sodotheactionsthatpeoplewilltake.Example:ChangesinseveralfactorshaveresultedinincreasedobesityinAmericansoverthelastcoupleofdecades,including:DecreasesinthepriceoffastfoodrelativetohealthfulfoodImprovednon-activeentertainmentoptionsIncreasedavailabilityofhealthcareandinsurance,protectingpeopleagainsttheconsequencesoftheiractions3.OptimalDecisionsAreMadeattheMarginWhilesomedecisionsareall-or-nothing,mostdecisionsinvolvedoingalittlemoreoralittlelessofsomething.Example:ShouldyouwatchanextrahourofTVorstudyinstead?Economiststhinkaboutdecisionslikethisintermsofthemarginalcostandbenefit(MCandMB):theadditionalcostorbenefitassociatedwithasmallamountextraofsomeaction.ComparingMCandMBisknownasmarginalanalysis.ApplytheConcept:HealthInsuranceandObesity(1of2)ObesityisrisinginAmerica,forvariousreasons.Isoneofthosereasonshealthinsurance?ApplytheConcept:HealthInsuranceandObesity(2of2)Peoplewithhealthinsurancehavelessincentivetostayhealthythanpeoplewithouthealthinsurance.Holdingconstantotherfactorslikeage,gender,andincome,researchshowspeoplewithhealthinsurancearemorelikelytobeobese.Theyarerespondingtoeconomicincentives.1.2TheEconomicProblemThatEverySocietyMustSolveDiscusshowaneconomyanswersthesequestions:Whatgoodsandserviceswillbeproduced?Howwillthegoodsandservicesbeproduced?Whowillreceivethegoodsandservicesproduced?Inaworldofscarcity,wehavelimitedeconomicresourcestosatisfyourdesires.Thereforewefacetrade-offs.Trade-off:Theideathat,becauseofscarcity,producingmoreofonegoodorservicemeansproducinglessofanothergoodorservice.1.WhatGoodsandServicesWillBeProduced?Individuals,firms,andgovernmentsmustdecideonthegoodsandservicesthatshouldbeproduced.Anincreaseintheproductionofonegoodrequiresthereductionintheproductionofsomeothergood.Thisisatrade-off,resultingfromthescarcityofproductiveresources.Thehighest-valuedalternativegivenupinordertoengageinsomeactivityisknownastheopportunitycost.Example:theopportunitycostofincreasedfundingforspaceexplorationmightbegivinguptheopportunitytofundcancerresearch.2.HowWilltheGoodsandServicesBeProduced?Afirmmighthaveseveraldifferentmethodsforproducingitsgoodsandservices.Example#1:AmusicproducercanmakeasongsoundgoodbyHiringagreatsingerandusingstandardproductiontechniques;HiringamediocresingerandusingAuto-Tunetocorrecttheinaccuracies.Example#2:Asthecostofmanufacturinglaborchanges,afirmmightrespondbyChangingitsproductiontechniquetoonethatemploysmoremachinesandfewerworkersMovingitsfactorytoalocationwithcheaperlabor3.WhoWillReceivetheGoodsandServicesProduced?ThewaywearemostfamiliarwithintheUnitedStatesisthatpeoplewithhigherincomesobtainmoregoodsandservices.Changesintaxandwelfarepolicieschangethedistributionofincome,thoughpeopleoftendisagreeabouttheextenttowhichthis“redistribution”isdesirable.TypesofEconomiesCentrallyplannedeconomy:Aneconomyinwhichthegovernmentdecideshoweconomicresourceswillbeallocated.Marketeconomy:

Aneconomyinwhichthedecisionsofhouseholdsandfirmsinteractinginmarketsallocateeconomicresources.Mixedeconomy:Aneconomyinwhichmosteconomicdecisionsresultfromtheinteractionofbuyersandsellersinmarketsbutinwhichthegovernmentplaysasignificantroleintheallocationofresources.WhichofthesebestdescribestheUnitedStatestoday?EfficiencyofMarketEconomiesMarketeconomiestendtobemoreefficientthancentrally-plannedeconomies.Marketeconomiespromote:Productiveefficiency,asituationinwhichagoodorserviceisproducedatthelowestpossiblecost;andAllocativeefficiency,astateoftheeconomyinwhichproductionisinaccordancewithconsumerpreferences;inparticular,everygoodorserviceisproduceduptothepointwherethelastunitprovidesamarginalbenefittosocietyequaltothemarginalcostofproducingit.SourceofEconomicEfficiencyProductiveefficiencycomesaboutbecauseofcompetition.Allocativeefficiencyarisesduetovoluntaryexchange.Voluntaryexchange:Asituationthatoccursinmarketswhenboththebuyerandthesellerofaproductaremadebetteroffbythetransaction.Eachtransactionthattakesplaceimprovesthewell-beingofthebuyerandseller;transactionscontinueuntilnofurtherimprovementcantakeplace.CaveatsaboutMarketEconomiesMarketsmaynotresultinfullyefficientoutcomes.Forexample:PeoplemightnotimmediatelydothingsinthemostefficientwayGovernmentsmightinterferewithmarketoutcomesMarketoutcomesmightignorethedesiresofpeoplewhoarenotinvolvedintransactions–ex:pollutionMarketEconomiesandEquityEconomicallyefficientoutcomesarenotnecessarilydesirable.Lessefficientoutcomesmaybemorefairorequitable.Equity:Thefairdistributionofeconomicbenefits.Animportanttrade-offforagovernmentisthatbetweenefficiencyandequity.Example:Ifwetaxincome,peoplemightworklessoropenfewerbusinesses,butthosetaxreceiptscanfundprogramsthataidthepoor.1.3EconomicModelsExplainhoweconomistsusemodelstoanalyzeeconomiceventsandgovernmentpolicies.Economistsdevelopeconomicmodelstoanalyzereal-worldissues.Buildinganeconomicmodeloftenfollowsthesesteps:Decideontheassumptionstouse.Formulateatestablehypothesis.Useeconomicdatatotestthehypothesis.Revisethemodelifitfailstoexplaintheeconomicdatawell.Retaintherevisedmodeltohelpanswersimilareconomicquestionsinthefuture.ImportantFeaturesofEconomicModelsAssumptionsandsimplifications:everymodelneedstheminordertobeuseful.Testability:goodmodelsgeneratetestablepredictions,whichcanbeverifiedordisprovenusingdata.Economicvariables:somethingmeasurablethatcanhavedifferentvalues,suchasthenumberofpeopleemployedinmanufacturing.FormingHypothesesinEconomicModelsInaneconomicmodel,ahypothesisisastatementaboutaneconomicvariablethatmaybeeithercorrectorincorrect.Ex:TheincreaseduseofindustrialrobotsandinformationtechnologyinU.S.factorieshasresultedinadeclineinmanufacturingemployment.Mosteconomichypothesesareaboutcausalrelationships.TestingHypothesesinEconomicModelsAftercollectingtherelevantdata,economistsusestatisticalmethodstoevaluatethehypotheses.Itisoftendifficulttoestablishwhetheraneffectiscausal.Ex:Employmentinmanufacturingdiddeclineatthesametimethattheuseofrobotsincreased,butthatdoesn’tproveonecausedtheother.Economistsacceptanduseaneconomicmodelifitleadstohypothesesthatareconfirmed(ornotrejected)bystatisticalanalysis.Newinformationmayrejectpreviously-believedhypotheses.PositiveandNormativeAnalysisEconomiststrytomimicnaturalscientistsbyusingthescientificmethod.Buteconomicsisasocialscience;studyingthebehaviorofpeopleisoftentricky.Whenanalyzinghumanbehavior,wecanperform:Positiveanalysis:analysisconcernedwithwhatis.Normativeanalysis:analysisconcernedwithwhatoughttobe.Economistsmostlyperformpositiveanalysis.Governmentpolicymakershaveincreasinglyreliedoneconomicanalysis.ApplytheConcept:WhatCanEconomicsContributetotheDebateoverTariffs?Governmentscanimposetariffs(taxesonimports)toraiserevenueordiscourageimports.Economictheorycanidentifythelikelywinnersandlosersfromaparticulartariff.Economicanalysiscanusemodelsanddatatoestimatethedollaramountsgainedbythewinnersandlostbythelosers.Typically,thelossesoutweighthegains,soeconomistsgenerallydiscouragetariffs.Butpolicymakersmayplacehighervalueonthewell-beingofsomegroups—anormativejudgment.1.4MicroeconomicsandMacroeconomicsDistinguishbetweenmicroeconomicsandmacroeconomics.Microeconomicsisthestudyofhowhouseholdsandfirmsmakechoices,howtheyinteractinmarkets,andhowthegovernmentattemptstoinfluencetheirchoices.Macroeconomicsisthestudyoftheeconomyasawhole,includingtopicssuchasinflation,unemployment,andeconomicgrowth.Table1.1IssuesinMicroeconomicsandMacroeconomicsExamplesofMicroeconomicIssuesExamplesofMacroeconomicIssuesHowconsumersreacttochangesinproductpricesHowfirmsdecidewhatpricestochargefortheproductstheysellWhichgovernmentpolicywouldmostefficientlyreduceobesityThecostsandbenefitsofapprovingthesaleofanewprescriptiondrugThemostefficientwaytoreduceairpollutionWhyeconomiesexperienceperiodsofrecessionandincreasingunemploymentWhy,overthelongrun,someeconomieshavegrownmuchfasterthanothersWhatdeterminestheinflationrateWhatdeterminesthevalueoftheU.SdollarinexchangeforothercurrenciesWhethergovernmentinterventioncanreducetheseverityofrecessions1.5EconomicSkillsandEconomicsasaCareerDescribeeconomicsasacareerandthekeyskillsyoucangainfromstudyingeconomics.Whenbuyingahouse,ahomeinspectorcandescribeproblemsthehousehas,andadvisehowtofixtheproblems,andthelikelycost.Similarly,aneconomistcandescribehowindividuals,businesses,andgovernmentsmakechoices,andwhattheconsequencesofthosechoiceswouldbe;andadviseonhowbetterdecisionscanbemade.SomeTypicalEconomistRolesinBusiness,Government,orNonprofitOrganizationsForecastthedemandforelectriccarsoverthenext10yearsForecastfuturevaluesofinterestratesEvaluatewhethernewstoreswouldbeprofitableEvaluatetheeffectonamarketfromaproposedmergerForecastregionaltrendsinemploymentandproductionInterpretmonetarypolicyforwideaudiencesAnalyzetheeffectivenessofadevelopmentprograminalow-incomecountry1.6APreviewofImportantEconomicTermsDefineimportanteconomicterms.Likeallfieldsofstudy,economicsusestermsorjargonwithspecific,precisemeanings.Sometimesthesetermswillbeusedinwaysthatdifferevenfromcloselyrelateddisciplines.Examples:Technology:theprocessesafirmusestoproducegoodsandservicesCapital:manufacturedgoodsthatareusedtoproduceothergoodsandservicesPaycloseattentiontotermsdefinedinclassandinthetextbook!Appendix:UsingGraphsandFormulasUsegraphsandformulastoanalyzeeconomicsituations.Amapisasimplifiedmodelofreality,showingessentialdetailsonly.Economicmodels,withfeatureslikegraphsandformulas,canhelpusunderstandeconomicsituationsjustlikeamaphelpsustounderstandthegeographiclayoutofacity.Figure1A.1BarGraphsandPieChartsTheleftpanelshowsabargraphofmarketsharedatafortheU.S.automobileindustry;marketshareisrepresentedbytheheightofthebar.Therightpanelshowsapiechartofthesamedata;marketshareisrepresentedbythesizeofthe“sliceofthepie”.Figure1A.2Time-SeriesGraphsBothpanelspresenttime-seriesgraphsofFordMotorCompany’sworldwidesalesduringeachyearfrom2005to2015.Therightpanelhasatruncatedscaleontheverticalaxis,whiletheleftpaneldoesnot.Asaresult,thefluctuationsinFord’ssalesappearsmallerintheleftpanelthantherightone.Figure1A.3PlottingPriceandQuantityPointsinaGraphThefigureshowsatwo-dimensionalgridonwhichwemeasurethepriceofpizzaalongtheverticalaxis(ory-axis)andthequantityofpizzasoldperweekalongthehorizontalaxis(orx-axis).Eachpointonthegridrepresentsoneofthepriceandquantitycombinationslistedinthetable.Byconnectingthepointswithaline,wecanbetterillustratetherelationshipbetweenthetwovariables.Figure1A.4CalculatingtheSlopeofaLine(1of2)Wecancalculatetheslopeofalineasthechangeinthevalueofthevariableonthey-axisdividedbythechangeinthevalueofthevariableonthex-axis.Becausetheslopeofastraightlineisconstant,wecanuseanytwopointsinthefiguretocalculatetheslopeoftheline.Figure1A.4CalculatingtheSlopeofaLine(2of2)Forexample,whenthepriceofpizzadecreasesfrom$14to$12,thequantityofpizzademandedincreasesfrom55perweekto65perweek.So,theslopeofthislineequals?2dividedby10,or?0.2.Figure1A.5ShowingThreeVariablesonaGraph(1of3)Thedemandcurveforpizzashowstherelationshipbetweenthepriceofpizzasandthequantityofpizzasdemanded,holdingconstantotherfactorsthatmightaffectthewillingnessofconsumerstobuypizza.Figure1A.5ShowingThreeVariablesonaGraph(2of3)Ifthepriceofpizzais$14(pointA),anincreaseinthepriceofhamburgersfrom$1.50to$2.00increasesthequantityofpizzasdemandedfrom55to60perweek(pointB)andshiftsustoDemandcurve2.Figure1A.5ShowingThreeVariablesonaGraph(3of3)Or,ifwestartonDemandcurve1andthepriceofpizzais$12(pointC),adecreaseinthepriceofhamburgersfrom$1.50to$1.00decreasesthequantityofpizzademandedfrom65to60perweek(pointD)andshiftsustoDemandcurve3.Figure1A.6GraphingthePositiveRelationshipbetweenIncomeandConsumptionInapositiverelationshipbetweentwoeconomicvariables,asonevariableincreases,theothervariablealsoincreases.Inanegativerelationship,asonevariableincreases,theotherdecreases.Thisfigureshowsthepositiverelationshipbetweendisposablepersonalincomeandconsumptionspending.Figure1A.7DeterminingCauseandEffectUsinggraphstodrawconclusionsaboutcauseandeffectishazardous.Forexample,inpanel(a),asthenumberoffiresinfireplacesincreases,thenumberofleavesontreesfalls;butthefiresdon’tcausetheleavestofall.Inpanel(b),asthenumberoflawnmowersbeingusedincreases,sodoestherateatwhichgrassgrows.AreGraphsofEconomicRelationshipsAlwaysStraightLines?Therelationshipbetweentwovariablesislinearwhenitcanberepresentedbyastraightline.Feweconomicrelationshipsareactuallylinear.Howeverlinearapproximationsaresimplertouseandareoften“goodenough”inmodeling.Figure1A.8TheSlopeofaNonlinearCurve(panel(a))Anon-linearcurvehasdifferentslopesatdifferentpoints.ThiscurveshowsthetotalcostofproductionforvariousquantitiesofAppleWatches.Wecanapproximateitsslopeoverasectionbymeasuringtheslopeasifthatsectionwerelinear.BetweenCandD,theslopeisgreaterthanbetweenAandB;sowesaythecurveissteeperbetweenCandDthanbetweenAandB.Figure1A.8TheSlopeofaNonlinearCurve(panel(b))Anotherwaytomeasuretheslopeofanon-linearcurveistomeasuretheslopeofatangentlinetothecurve,atthepointwewanttoknowtheslope.FormulaforaPercentageChangeOneimportantformulaisthepercentagechange,whichisthechangeinsomeeconomicvariable,usuallyfromoneperiodtothenext,expressedasapercentage.Figure1A.9ShowingaFirm’sTotalRevenueonaGraphTheareaofarectangleisequaltoitsbasemultipliedbyitsheight;totalrevenueisequaltoquantitymultipliedbyprice.Here,totalrevenueisequaltothequantityof125,000bottlestimesthepriceof$2.00perbottle,or$250,000.Theareaofthegreen-shadedrectangleshowsthefirm’stotalrevenue.Figure1A.10TheAreaofaTriangleTheareaofatriangleisequalto?multipliedbyitsbasemultipliedbyitsheight.Theareaoftheblue-shadedtrianglehasabaseequalto150,000–125,000,or25,000,andaheightequalto$2.00–$1.50,or$0.50.Therefore,itsareaequals?×

25,000×

$0.50,or$6,250.SummaryofUsingFormulasWheneveryoumustuseaformula,youshouldfollowthesesteps:Makesureyouunderstandtheeconomicconcepttheformularepresents.Makesureyouareusingthecorrectformulafortheproblemyouaresolving.Makesurethenumberyoucalculateusingtheformulaiseconomicallyreasonable.Forexample,ifyouareusingaformulatocalculateafirm’srevenueandyouranswerisanegativenumber,youknowyoumadeamistakesomewhere.CopyrightEconomicsSeventhEditionChapter2Trade-offs,ComparativeAdvantage,andtheMarketSystemCopyright?2019,2017,2015PearsonEducation,Inc.AllRightsReserved.ChapterOutline2.1

ProductionPossibilitiesFrontiersandOpportunityCosts2.2

ComparativeAdvantageandTrade2.3

TheMarketSystemScarcityandTrade-offsHouseholds,firmsandgovernmentscontinuallyfacedecisionsabouthowbesttousetheirscarceresources.Scarcity:asituationinwhichunlimitedwantsexceedthelimitedresourcesavailabletofulfillthosewants.Scarcityrequirestrade-offs.Economicsteachesustoolstohelpmakegoodtrade-offs.Example:Whendecidinghowtouseitsscarceworkersandmachinery,ifTeslawantstoproducemoreModel3s,thoseresourceswillnotbeavailabletoproduceModelSs.2.1ProductionPossibilitiesFrontiersandOpportunityCostsUseaproductionpossibilitiesfrontiertoanalyzeopportunitycostsandtrade-offs.Aproductionpossibilitiesfrontier(PPF)isacurveshowingthemaximumattainablecombinationsoftwogoodsthatcanbeproducedwithavailableresourcesandcurrenttechnology.IsthePPFapositiveornormativetool?Positive;itshows“whatis”,not“whatshouldbe”.Figure2.1Tesla’sProductionPossibilitiesFrontier(1of2)Teslacanproduceitsoriginalmodels,oritsnewModel3s.ProducingmoreModel3srequiresreducingthenumberoforiginalmodelsproduced.PointsonthePPFareattainableforTesla.Pointsbelowthecurveareinefficient.Pointsabovethecurveareunattainablewithcurrentresources.Figure2.1Tesla’sProductionPossibilitiesFrontier(2of2)Toproduce20moreModel3s(e.g.movingfromAtoB),Teslamustproduce20feweroriginalmodels.The20feweroriginalmodelsistheopportunitycostofproducing20moreModel3s.Opportunitycost:Thehighest-valuedalternativethatmustbegivenuptoengageinanactivity.Figure2.2IncreasingMarginalOpportunityCostsOnthepreviousslide,opportunitycostswereconstant.Butopportunitycostsareoftenincreasing.Why?Someresourcesarebettersuitedtoonetaskthananother.Thefirstresourcesto“switch”aretheonebestsuitedtoswitching.Themoreresourcesalreadydevotedtoanactivity,thesmallerthepayofftodevotingadditionalresourcestothatactivity.Figure2.3EconomicGrowth(panel(a))Asmoreeconomicresourcesbecomeavailable,theeconomycanmovefrompointAtopointB,producingmoretanksandmoreautomobiles.Shiftsintheproductionpossibilitiesfrontierrepresenteconomicgrowth.Economicgrowth:theabilityoftheeconomytoincreasetheproductionofgoodsandservices.Figure2.3EconomicGrowth(panel(b))Thispanelshowstechnologicalimprovementintheautomobileindustry.Thequantityoftanksthatcanbeproducedremainsunchanged.Asinthepreviousslide,manypreviouslyunattainablecombinationsarenowattainable.ApplytheConcept:APPFforExamGradesSupposeyouhavealimitedamountoftimetostudyfortwoexams,EconomicsandAccounting.Whatwouldtheproductionpossibilitiescurvefortheexamgradeslooklike?Astraightline,likethePPFforTesla’svehicles,orAbowed-outwardcurve,likethePPFfortanksandautomobiles?Answer:2,thefirsthourspentstudyingeconomicsismuchmorevaluable(andhasaloweropportunitycost)thanthelasthour.2.2ComparativeAdvantageandTradeDescribecomparativeadvantageandexplainhowitservesasthebasisfortrade.Youandyourneighboreachhavealimitedtimetopickapplesand/orcherries.Thetableshowstheamountofeachfruitthatyoucouldeachpick,bydevotingallofyourtimetothatfruit.BlankYouBlankYourNeighborBlankBlankApplesCherriesApplesCherriesDevotealltimetopickingapples20pounds0pounds30pounds0poundsDevotealltimetopickingcherries0pounds20pounds0pounds60poundsFigure2.4ProductionPossibilitiesforYouandYourNeighbor,withoutTradeIfyouspendallofyourtimepickingcherries,youcanpick20poundsofcherries;orifyouspendallyourtimepickingapples,youcanpick20poundsofapples.Yourneighborcansimilarlypick60poundsofcherriesor30poundsofapples.SpecializationandTradeWhatifyouandyourneighbordecidedtospecializeandtrade?Trade:Theactofbuyingandselling.Couldyourneighborbenefitfromtrade?Sheisbetteratpickingbothapplesandcherries…Bothofyoucanbenefitfromtrade,byspecializinginwhatyouarerelativelygoodat.Let’sseehow…Figure2.5GainsfromTrade(1of3)Whenyoudon’ttradewithyourneighbor,let’ssayyoupickandconsume8poundsofapplesand12poundsofcherriesperweek—pointAinpanel(a).Whenyourneighbordoesn’ttradewithyou,shepicksandconsumes9poundsofapplesand42poundsofcherriesperweek—pointCinpanel(b).Figure2.5GainsfromTrade(2of3)Ifyouspecializeinpickingapples,youcanpick20pounds.Ifyourneighborspecializesinpickingcherries,shecanpick60pounds.Ifyoutrade10poundsofyourapplesfor15poundsofyourneighbor’scherries,youwillbeabletoconsume10poundsofapplesand15poundsofcherries—pointBinpanel(a).Figure2.5GainsfromTrade(3of3)Yourneighborcannowconsume10poundsofapplesand45poundsofcherries—pointDinpanel(b).Youandyourneighborarebothbetteroffasaresultoftrade.Notethatyourneighborbenefitsfromtradeeventhoughshecouldproducemoreofeitherfruitthanyoucould.Table2.1ASummaryoftheGainsfromTradeBlankYouBlankYourNeighborBlankBlankApples(inpounds)Cherries(inpounds)Apples(inpounds)Cherries(inpounds)Productionandconsumptionwithouttrade812942Productionwithtrade200060Consumptionwithtrade10151045Gainsfromtrade(increasedconsumption)2313Bothyouandyourneighborareabletoconsumemorewithtradethanwithout.ExplainingtheGainsfromSpecializationandTradeHowcouldbothofyoubenefitfromtrade,whenyourneighborwassomuchbetterthanyou?Economistssayyourneighborhadanabsoluteadvantageinbothcherryandapplepicking,butyouhadacomparativeadvantageinpickingapples.Absoluteadvantage:Theabilityofanindividual,afirm,oracountrytoproducemoreofagoodorservicethancompetitors,usingthesameamountofresources.Comparativeadvantage:Theabilityofanindividual,afirm,oracountrytoproduceagoodorserviceataloweropportunitycostthancompetitors.Table2.2OpportunityCostsofPickingApplesandCherriesBlankOpportunityCostofPicking1PoundofApplesOpportunityCostofPicking1PoundofCherriesYou1poundofcherries1poundofapplesYourNeighbor2poundsofcherries0.5poundofapplesThebasisfortradeiscomparativeadvantage,notabsoluteadvantage.Individuals,firms,andcountriesarebetteroffiftheyspecializeinproducinggoodsandservicesforwhichtheyhaveacomparativeadvantageandobtaintheothergoodsandservicestheyneedbytrading.ApplytheConcept:ComparativeAdvantageandHouseworkPeoplelivingtogetherhavetodivideuphouseholdchores.Basiceconomicconceptslikecomparativeadvantagecanprovideusefulinsightinthedivisionoflabor.SupposeJackisfasterthanJillatbothcookingandlaundry.However:JackisMUCHfasteratpreparingtastymeals,whileJackisonlyalittlefasteratdoinglaundryJack’scomparativeadvantageisincooking—tocookatastymeal,hegivesuptheopportunitytoperformlesslaundrythanJill—soheshouldspecializeinthis,whileJillspecializesinlaundry.2.3TheMarketSystemExplainthebasicsofhowamarketsystemworks.Amarketisagroupofbuyersandsellersofagoodorservice,andtheinstitutionorarrangementbywhichtheycometogethertotrade.Twokeygroupsparticipateinthemoderneconomy:Householdsconsistofindividualswhoprovid